They seized the eastern coastal towns of Ras Lanuf, Brega and Uqayla after pro-Gaddafi forces – under pressure from allied air strikes – withdrew.
The rebel gains come after they re-captured the port of Ajdabiya from Col Gaddafi’s forces on Saturday.US, French, British and other allied aircraft started attacking Libyan government troops eight days ago.
The military coalition was assembled after the UN Security Council authorised action to protect civilians.
“Gaddafi’s forces are now scared rats,” Mohammed Ali el-Atwish, a 42-year-old rebel fighter,” told the AFP news agency.
“They are dropping their weapons and uniforms and dressing as civilians. We are no longer concerned about Gaddafi’s forces at all.”
France says its aircraft destroyed at least five Libyan government jets and two helicopters on Saturday night at a government air base near rebel-held Misrata, which has become a key focus for the battle in western Libya.
Misrata is the only significant rebel-held city left in the west, and has been under heavy bombardment for days.
The Libyan government says coalition forces have been carrying out air strikes between Ajdabiya and the town of Sirte, a major pro-Gaddafi stronghold.
In the capital Tripoli, government spokesman Mussa Ibrahim said: “We are losing many lives, military and civilians.”
British Defence Secretary Liam Fox has told the BBC that coalition countries attacking targets in Libya will not supply arms to anti-Gaddafi rebels, despite reports that this is being actively considered.
Dr Fox said there was a UN arms embargo across the entire country, adding “We have to accept that.”
The rebellion against Col Gaddafi’s four decades in power began in mid-February, inspired by uprisings in neighbouring Egypt and Tunisia which saw the leaders there overthrown.
But the eastern towns along the coast were lost one-by-one to advancing pro-Gaddafi forces before coalition air strikes started last week.
Libyan officials say the strikes have killed nearly 100 civilians.US Defence Secretary Robert Gates said there were intelligence reports that Col Gaddafi’s forces have taken the bodies of people killed in their own attacks and placed them at the site of air strikes in an attempt to blame the coalition for their deaths.
In his weekly address, US President Barack Obama said that the “clear and focused” military mission in Libya was succeeding.
“Make no mistake, because we acted quickly, a humanitarian catastrophe has been avoided and the lives of countless civilians – innocent men, women and children – have been saved,” he said.